Recently, social media and WhatsApp have been buzzing about the GST judgment by the Allahabad High Court related to M/s R.T. Infotech. There is a widespread misunderstanding circulating that if a supplier defaults on GST payment, the purchaser’s Input Tax Credit (ITC) would never need to be reversed. But is this what the Court actually decided?
In reality, the GST department alleged that M/s R.T. Infotech claimed ITC on seven bills from Airtel, but Airtel had not deposited the GST amount to the government treasury. The department considered this a violation of Section 16(2)(c) of the CGST Act and demanded the reversal of ITC from M/s R.T. Infotech.
On the other hand, M/s R.T. Infotech clarified explicitly:
"submitted reply ..., clearly stating therein that the difference of ITC claimed and credit appearing in GSTR-2A is not of the bills of M/s Bharti Airtel Ltd. and the payment has been made on the above seven bills through R.T.G.S. He further submits that the liability of tax has duly been discharged by the petitioner and no inaction on the part of the petitioner and therefore, the petitioner cannot Fbe held responsible."
Understanding the seriousness of the matter, the Allahabad High Court did not deliver a final judgment but rather directed the department to reconsider the matter thoroughly, hearing all parties again, and then issue a well-reasoned and speaking order.
It is crucial to understand the context clearly by referring to the GST Council meeting of May 2018 and the Calcutta High Court’s judgment in the "Suncraft Energy Pvt. Ltd." case. They have clarified that ITC will not automatically be reversed merely because the supplier defaults in tax payment.
The GST Council explicitly stated in its press release:
"Furthermore, it was clarified that there shall not be any automatic reversal of input tax credit from buyer on non-payment of tax by seller. Further, it is clarified that in case of default in payment of tax by the seller, however, reversal of credit from the buyer shall also be an option available with the revenue authorities to address the exceptional situations like missing dealer, closure of business by supplier or supplier not having adequate assets etc."
Therefore, one should not misinterpret judgments or notices according to personal convenience. The GST law clearly mentions that the purchaser's ITC remains protected only if it is proven that the department did not make any genuine effort to recover tax from the supplier, thereby showing gross negligence.
We urge you to interpret GST laws and court decisions in their true and complete context. The issue of ITC in cases where the supplier defaults on tax payments is sensitive and significant. Thus, it is important to understand the gravity of the matter fully and refrain from spreading incomplete or misleading information.
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